Why Is the Rent So Damn High?

I live in Stuyvesant Town, an 8,757-unit behemoth in New York's East Village that's likely visible from space. It's a little like living in a mix between a college campus and a Florida suburb, which I like, plus it's seemingly one of the only affordable places to live in Manhattan. Well, "affordable" with a caveat: I pay less to live there than I would if I was anywhere in Brooklyn, but only because I split a two-bedroom with a couple.

When I lived in other large cities, I rented entire one-bedroom apartments for about half of what I pay for my current spot; when I lived in a small town, I had a big room in a huge house with a backyard for even less. New York has always been different, the place you make sacrifices to live inside, an archipelago teeming with so much culture that people will slave away at lousy jobs and sleep in closets just to be near all that light and sound.

But though the rent here has always been too damn high, it's getting worse: A growing number of New Yorkers are "rent-burdened," meaning 30 percent or more of their incomes go to rent and utilities. Around 21 percent of residents are "severely rent-burdened," meaning more than half their money goes to rent, according to a recent survey—and I'm one of them.

On a basic level, I understand what everyone understands—there isn't enough housing in this city to keep up with demand; landlords will charge whatever the law allows—but the intricacies of the rental market make my head spin. (I'm still trying to figure out what it means that my complex was sold for $5.3 billion to a private equity firm and a Canadian real estate fund.)

To figure out why rent is so high, and what can be done about it, I reached out to experts who, unfortunately, said the first question was very simple and the second was very, very complicated.

The Problem

The way it's supposed to work is this: You graduate school, broke but starry-eyed and probably itching to get out of your square-shaped state to New York City or Portland or Austin or LA. You slog your way through an entry-level job, accumulate the trappings of an adult life, then settle down and buy property, after which you shoot out offspring and the cycle begins anew.

The housing bust disrupted this process. Foreclosures forced former owners back into the rental market, where they collided with recent college graduates who were also trying to find places to live while struggling to find work in a suddenly crappy economy.

"It's just part of the generational fabric," said Svenja Gudell, the chief economist for the real estate website Zillow. "[Millennials are] getting married later in life, they're having kids later in life. All that means they're staying in the rental market for much longer than they used to, six or more years as opposed to two to three years. All of these people are demanding apartments."

Though millennials have been buying homes in increasing numbers, the market has remained tight, and in any case it's hard for many young people to save for a downpayment due to high rents, among other factors.

In New York and other cities, this increased demand for rental properties have led to formerly industrialized areas transformed into trendpiece-spawning hip neighborhoods. Markus Moos, a professor at the University of Waterloo in Canada, studies why city centers are getting younger. He calls this phenomenon "youthification." Basically, he's found that young people move where housing is cheap and abundant—often de-industrialized areas where former factory space, for instance, has become residential. The influx causes amenities and culture to pop up, which means more and more people then move there despite housing getting scarcer.

The Furman Center at New York University has studied rent trends in the 11 largest metropolitan areas by population between 2006 and 2013. A report that came out in May confirmed what should already be obvious to anyone who's looked for an apartment lately: The number of renters has gone up in all of them.

The report also found that when developers try to meet the demands of "youthification" or just an increase in the number of renters in general, they tend to build units that are largely unaffordable.

If you're in New York, think of the luxury high-rises that the girls on The Bedford Stop live in. If you're not, it still shouldn't be hard to think of an example of an apartment building with a name that sounds like a fancy cocktail and a gym in the basement. If you're the sort of young person who moved straight from college to one of the country's big, shiny cities, you probably can't afford to live in these places.

To make matters worse, wages have been flat for years; inflation-adjusted household income was lower in 2013 than it was in 1989. Combine that with rising rents and it's no surprise that so many Americans are spending more and more of their paychecks just to keep a roof over their heads.

"The majority of renters were rent burdened in most of the cities we studied, with the exception of Dallas, Houston, San Francisco, and Washington DC," Brian Karfunkel, one of the Furman report's authors told me. "But in all 11 cities, living with unaffordable rents is not an anomaly, and in many is even the norm."

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The Solution

On the personal level, there aren't many options if you want to save money on rent. You could move in with roommates, but you probably already did that. If your city has some version of rent stabilization (rules that control how much landlords can raise rents when leases are up) you can try to find a stabilized apartment and hang onto it at all costs—but that's not much help if you don't already live in a stabilized apartment.

More drastically, you could move to a town where there isn't a severe shortage of rental units. If you go by the Furman report, if you want to do that and stay in a big city, your options are: Atlanta. Sorry everyone.

If you're not ready to make a big life change to reduce your rent burden, you better hope that the country's economists and politicians figure out how to fix America soon.

Among people who study this issue, there seems to be two camps. One group thinks the solution is for cities to offer more rent stabilization, which the other group thinks this is bad, because it just encourages developers to build condos to skirt the requirements.

Heated, complex fights over new construction are happening all over the country. In May, one politician in San Francisco proposed a moratorium on creating new market-rate units until a better plan could be drafted to combat full-stop development in the city's Mission District. When and if that plan comes into existence, it might look a little bit like the one New York City Mayor Bill de Blasio devised, which forces developers of large apartment buildings to set aside 30 percent of their units for affordable housing.

De Blasio's critics on the left say that this plan doesn't go far enough to combat poverty and gentrification. But there's only so much a single mayor can do. To make renting more affordable, you'd basically have to figure out how to solve the problem of income inequality and bring millions of Americans out of poverty. If you've got an idea of how to get the federal government to do that, please don't keep it to yourself.

"Income inequality is certainly something that's driving these things," says Gudell of Zillow. "Having wage growth be higher would be good, creating the correct type of jobs. We've been creating jobs, but a lot of those jobs aren't higher-paying jobs."